The company's recent situation
Recently, we held a Haier Smart Home conference call to have in-depth discussions with management on the company's annual report performance and future development strategies.
In terms of internationalization, North America stabilizes high-end and develops categories, and Europe improves profits: 1) In North America, in 2023, the company successfully resisted inflation and competitive pressure through high-end brand growth and smart HQ platform construction, and North American revenue achieved 4% year-on-year growth. Looking ahead to 2024, the company expects to expand coverage categories such as household and commercial use, small household appliances, water heaters, heat pumps, etc. while continuing to increase its share of high-end products. 2) On the European side, the company's revenue grew 23% year over year in 2023, but profitability was lacking due to slow price adjustments. The company expects Europe to continue to grow while improving profitability. It has adopted measures such as building local factories, increasing the speed of product innovation and market response, improving organizational efficiency, and strengthening the autonomous management rights of each division. 3) The decline in the Australian market in 2023 is mainly due to the failure of the main products to adapt to market trends in a timely manner and iterate from ultra-high-end models to mainstream price segment products. The company has begun to improve and is confident that it will achieve good growth this year. 4) In the Middle East and Africa market, the company has not invested much energy before, but the company believes there is more room for future growth. After the industrial park is put into operation in Egypt in May 2023, the company will provide localized products to the local area in a timely manner.
The company expects the growth rate of the air conditioning business to continue to increase in 2024:1) The company's air conditioning sector achieved good performance in 2023. The company believes that it will mainly benefit from material number and material optimization to reduce procurement costs, reduce manufacturing costs through mechanical changes and increased automation levels, and continue to improve scale advantages and profit margins. 2) The company increased its layout in the field of air conditioning, caught up with industry leaders in the field of core component R&D and manufacturing, provided full support to dealers and specialty stores on the channel side, jointly achieved goals, and optimized the product price segment structure. The company expects the air conditioning business to continue to grow steadily. 3) In terms of central aviation, domestic market companies have achieved both increase in scale and profit margin through technological iteration from maglev to air levitation; the European market has established HVAC companies and has now built a complete product matrix suitable for European HVAC; the US market has re-entered the commercial space sector, and the company expects this sector to become an important source of growth for GEA in the future.
reviews
We believe that in overseas markets, Haier is expected to continue to increase its market share, and Europe's future performance is expected to improve significantly; in the Chinese market, the air conditioning business and the Casadi brand will continue to be the core growth highlights.
Profit forecasting and valuation
We keep our 2024/2025 earnings forecast unchanged. Current A Shares/H Shares/D Shares correspond to 12.9x/10.9x/4.9x 2024e P/E. A/H/D shares maintained an outperforming industry rating, maintaining the A/H/D target price of 28.9 yuan/29.6 HKD/1.47, corresponding to 14.5x/13.3x/5.6x 2024e P/E for A/H/D shares, with an upward margin of 13%/22%/11%.
risks
Global business risk; risk of demand fluctuation; risk of increased competition; risk of acquisition failure.